How to pass bank compliance?

3 minutes to read

When registering a company, it is often necessary to open a bank account. Previously, there was no need to prepare numerous documents for this procedure, but now almost all countries have fairly strict legislation: Anti-Money Laundering and Counter Terrorist Financing (AML/CTF). Introduction of stricter measures began in 1989, when some countries became concerned about financial irregularities and security of the international financial system.

This is how the FATF (Financial Action Task Force) group appeared. At first, it included 30 states, and now more than 180 countries follow its rules. Recommendations of this organization are implemented in international and local legislation, so banks are forced to follow special instructions. Local jurisdiction requirements are added to them, e.g. confirmation of economic substance or filling out special forms for tax authorities.

What does the bank need to know about the company?

In accordance with the FATF instruction the bank should assess risk levels of clients, which is called risk-based approach. The more suspicions or doubts there are, the more documents the bank may require. It has to find out:

Who the beneficial owner of the company is and make sure that this information is true. For example, the residence address of the beneficiary, their work history, information about sources of income. Moreover, documents that disclose the ownership structure of the company will be required.

Objectives and nature of the company’s activities. Further, the bank will analyze account transactions and request supporting documents, if it deems something suspicious and non-compliant with the nature of the company’s activities. Therefore, at the stage of opening an account, it will request information about current or planned activities, structure, and expected transactions.

Real substance. In many jurisdictions, banks require documents that confirm that the company actually operates in the declared territory. The list of documents may differ, but essentially you need to prove that the company is managed in the country of registration. For example, it could be an office lease agreement, a list of employees and information about their qualifications, information about the director. If something seems suspicious to the bank, it may decide that it is a shell company.

How is the risk level assessed?

The lower the risk level according to the bank is, the faster and easier it will be to open a bank account. Risks may be related to the jurisdiction, company’s activities, products and services it produces, and the identity of the beneficiary. As a rule, the bank divides clients into two large groups: high-risk and medium-risk, but there is also grading within those groups.

In accordance with AML/CTF the risk is increased by:

  • complicated structure;
  • offshore registration;
  • beneficiary being a Politically Exposed Person (PEP);
  • transactions with significant amounts of cash;
  • registration in certain countries that are known for corruption or high level of drug trafficking.

Banks will treat clients with a high level of risk with caution and pay more attention, i.e. analyze suspicious transactions, request additional documents. They may also refuse service.

How to prepare for interaction with the bank?

Criteria for assessing risk levels may change along with the legislation. In addition, some banks may follow the requirements very strictly, while others are more lenient. If you comply with the requirements, competently structure the business, conduct compliance, then there should be no problem with opening a bank account. But in any case, this is a complicated procedure associated with careful preparation of documents. In some banks, if you receive a refusal, you are not allowed to try opening an account again, so it is important not to miss anything in the bank’s requirements. Full-time or outsourced lawyers with field-oriented qualifications will help with this.

YouReg provides assistance during all stages of registration and conduct of the company’s activities, including opening a bank account.

Book a call with YouReg Manager now and ask all your questions about company registration and bank account opening precesses during a free consultation!


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